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Hyatt Hotels Corporation Targets Record Footprint Expansion in 2016

The hotel operator is seeking to add 60 properties to its network this year.

A growing hotel base and rising guest spending helped Hyatt Hotels(NYSE:H) post a year-over-year pop in fourth-quarter results that were announced on Feb. 18. The hotel operator also predicted more gains ahead in 2016 as it opens a record number of new properties.

More on that in a minute, but first here's a look at how the Q4 results stacked up against the prior-year period:

Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)

Revenue

$1.11 billion

$1.08 billion

3%

Adjusted Net Income

$30 million

$47 million

-36%

Adjusted Earnings Per Share

$0.21

$0.31

-32%

Data source: Hyatt's financial filings.

What happened this quarter?Overall sales ticked higher as revenue per available room (RevPAR) grew by a healthy 2%. Meanwhile, a strong showing in the U.S. market helped Hyatt log a 20% increase in adjusted earnings (reported net income shrank due to a large property sale in the year-ago period). Here are the highlights from the quarter:

RevPAR rose by 2.1%, or 4.4% after accounting for currency changes, as compared to the prior quarter's 2.5% and 5.9% respective increases. Hyatt's results on this metric beat competitor Starwood Hotels(NYSE:HOT), whose Q4 RevPAR declined by 1% on a constant-currency basis.

In the U.S. market, Hyatt's RevPAR jumped 5% on improving occupancy rates and higher customer spending. Guests are now averaging $194 per night of total spending, up from $189 a year ago. Starwood's average daily spending, in comparison, was $178.

Fee revenue rose 6% to $107 million.

Hyatt opened 12 new hotels to bring its total growth to 49 units in 2015, compared to 43 new properties in 2014. The operator's base now stands at 260 hotels covering roughly 56,000 rooms.

What management had to sayCEO Mark Hoplamazian explained that key operating metrics all pointed the right direction this quarter. "The combination of higher RevPAR and increased margins as well as new hotel openings resulted in continued progress relative to our long-term goals," he said.

Hyatt's newest hotel, in Park City, Utah. Image source: Hyatt.

Management is particularly encouraged by the returns they're seeing on new properties, which is why they expect to set a record for hotel expansion in 2016. "Virtually all of the hotels that we opened over the last five years were new or recently renovated," Hoplamazian said, "resulting in a current global system that we believe is unrivaled in product quality, innovation, and leading design."

Those investments aren't soaking up all of Hyatt's operating cash, and so executives plan to return more cash to shareholders through stock repurchases. "Over the last five years we have decreased our [share count] by more than 20%," the CEO said. "We expect to continue repurchasing our stock, as reflected by a recent $250 million expansion of our share repurchase authorization."

Looking forwardHyatt sees solid growth for the year ahead as the base expands and prices and average spending tick higher. Executives projected that RevPAR at existing locations will increase by 4% at the midpoint of guidance. That projection is below the 5% that Hyatt logged in the year that just closed, but it's above the 3% that rival Starwood forecast for its business in 2016.

The growth won't come cheap, though. Capital spending is projected to rise to support the 60 new properties the company plans to open this year. Management also said that Hyatt is continuing to evaluate opportunities for acquisitions, joint ventures, or other aggressive consolidating moves the company could make to secure an even bigger global footprint.